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Next NDP leader needs a strong corporate tax plan

NDP leadership debates have so far been characterized by "violent agreement" on most issues. The main point of clash has been whether Old Age Security should be a universal benefit for all seniors or be phased out sooner for high-income seniors to redirect more support to the least fortunate. That clash has distracted from the more fundamental need for a fiscal plan to significantly improve social supports for seniors and other Canadians.

As we approach the second-last NDP leadership debate this weekend, let's recognize that all candidates support a combination of universal and means-tested benefits. Social democracy aims to reduce inequality by improving the overall benefit package. The last federal NDP platform featured substantial improvements such as childcare and pharmacare.

New Democrats were unable to campaign effectively on those progressive proposals because our platform lacked the revenues to pay for them. The key errors in 2015 were pledging to balance the budget immediately while restoring only two percentage points of corporate tax, edging the federal rate from 15 per cent up to just 17 per cent.

Fortunately, three of four leadership candidates committed months ago to strong corporate tax plans. The NDP would restore a federal rate of 19 per cent with Guy Caron, 19.5 per cent with Jagmeet Singh and 21 per cent with Niki Ashton.

The Parliamentary Budget Officer estimates that each percentage point of federal corporate income tax collects $1.7 billion. Even allowing for a corresponding increase in the dividend tax credit and some behavioural response from corporations, the proposed rate increases would raise annual revenues by between $6 billion and $9 billion.

Liberal and Conservative corporate tax cuts -- from a federal rate of 29 per cent in 2000 to 15 per cent since 2012 -- have failed to boost business investment as a share of the economy. Instead, they have helped Canada's private non-financial corporations nearly quadruple their cash holdings from $130 billion in 2000 to $485 billion today. Our economy would be stronger if we at least partially reversed these tax breaks to reinvest some of this idle money in needed public services and infrastructure.

Yet a purported front-runner in the leadership race, Charlie Angus, has not proposed to change the corporate tax rate. His only specific revenue proposal is to increase the top personal tax rate by three percentage points on incomes over $250,000.

The Parliamentary Budget Officer estimates that each percentage point of personal income tax over $200,000 collects $0.5 billion. Angus' call for an additional three per cent of an even more rarified income stratum could increase annual revenues by about a billion dollars -- a fraction of what should be raised on the corporate side and not nearly enough to meaningfully improve universal or targeted social supports.

Of course, taxing the highest incomes is an important way to fight growing inequality and the other NDP leadership candidates have also proposed to do so. But in terms of federal revenues, higher top personal income tax rates are no substitute for a higher general corporate tax rate.

With NDP members casting our leadership ballots next month, Angus needs to tell us how he would pay for any significant increase in social benefits. Would he run larger budget deficits than the Liberal government is already running? Does he have some other plan to raise revenue?

In the last federal election, Liberals overtook the NDP as the progressive alternative to Conservatives because the NDP did not put forward a fiscal plan to pay for ambitious improvements to public services and income supports. Our next leader must not repeat this mistake.

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